Problem 1

At December 31, 2016, PRINCESS CORP.'s noncurrent operating asset and accumulated depreciation accounts had balances as follows:

Land : Cost - 390,000 ; Accumulated Depreciation - (0) ; Depreciation Method - (none) ; Life - (not stated)

Building : Cost - 3,600,000 ; Accumulated Depreciation - 796,200 ; Depreciation Method - 150% declining ; Life - 25 years

Machinery and Equipment : Cost - 2,325,000 ; Accumulated Depreciation - 588,600 ; Depreciation Method - Straight Line ; Life - 10 years

Delivery Equipment : Cost - 396,000 ; Accumulated Depreciation - 258,600 ; Depreciation Method - 150% declining ; Life - 5 years

Leasehold Improvement : Cost - 663,000 ; Accumulated Depreciation - 331,500 ; Depreciation Method - Straight Line ; Life - 8 years

Depreciation is computed to the nearest month and the residual values of the depreciable assets are considered immaterial.

The following transactions occurred in 2017:

a.On January 6, a facility which included a land and a building structure was acquired from Wayde Corp. for P1,800,000. The land had a market value of P860,000.

b.On April 6, the constructions of parking lots, streets and sidewalks were completed at the acquired facility. The company incurred a total cost of P576,000 on this project. These expenditures had an estimated useful life of 12 years and are depreciable using the straight line method.

c.The leasehold improvements were completed on December 31, 2013, and had an estimated useful of 8 years. The related lease, which would have expired on December 31, 2019, was renewable for an additional 5-year term. On February 28, 2017 the company exercised the renewal option.

a.On July 1, machinery and equipment were purchased at a total invoice cost of P750,000. Additional cost of P30,000 and 90,000 for installation were incurred.

b.On August 30, Princess purchased a new truck for P45,000.

c.On September 30, a truck with a cost of P72,000 and a carrying value of P24,000 on the date of sale was sold for P34,500. Depreciation for the 9-month ended September 30, 2017 was P7,056.

d.On December 20, a machine with a cost of P51,000 and a carrying amount of P8,925 at date of disposition was scrapped without cash recovered.

Questions: Compute the depreciation expense for the following:

1.What is the depreciation expense ofBuilding?

2.What is the depreciation expense ofMachinery and equipment?

3.What is the depreciation expense ofLeasehold improvement?

4.What is the depreciation expense ofDelivery equipment?

Problem 2

Dela Cruz Company purchased land and building, demolished the existing building, and immediately constructed a new building. All of this occurred in the first eight months of 2018. In evaluating the company's Building account at year-end, you find the following amounts make up the P954,800 balance:

Jan. 5 Purchase price of land and building - P175,000

Jan. 15 Demolition cost of old building, net of P10,000 salvage - P54,000

Sept. 1 Cost of new building - P630,000

Sept. 1Insurance on new building - P12,000

Sept. 5Display fixture in new building - P62,800

Dec. 31 Interest expense on new building - P21,000

P954,800

Upon further analysis, you discover the following explanation for these amounts:

P175,000 - The land was appraised at P150,000 and the existing building, P50,000. A combined purchase price of P175,000 was negotiated because the seller was anxious to sell the property as soon as possible.

P 54,000 - The company negotiated a price of P64,000 for demolition of the old building, with the contractor retaining all salvage materials. The latter were estimated to be worth P10,000.

P630,000 - This represents the contract price for the new building, which was placed into service on September 1.

No interest was paid directly or indirectly related to this building prior to September 1.

P 12,000 - Insurance was taken out on the building and its contents at P12,000 for twelve-month period. P 62,800 - Display fixtures, which are separate from the building itself, were installed.

P 21,000 - A loan was taken out when the building was placed into service cover the P630,000 contract price. Interest was calculated at P630,000 at the effective 10% interest rate for four months, or P21,000.

Questions:

1.What is the correct balance of Land at year-end?

2.What is the correct balance of Building at year-end?